Don't put us to the test, tax chief warns crypto players

Eran Yaacov  / Photo: Shlomi Yosef , Globes

Israel Tax Authority director Eran Yaacov declares that anyone using cryptocurrencies to evade tax will be caught.

"There is no research in the world that a reputable economist can point to about the extent of the black economy. Anyone who reads the research sees that it's difficult to say how big it is. The OECD and the World Bank put the global figure at 20% of GDP. But is it 20% or 6% without gambling and prostitution, that's the question. We know for certain that the level of black capital, the shadow economy in Israel, is very high. It's not necessarily found at the very large businesses. It exists, and it does a great deal of harm to Israeli society. Who has not experienced at least once a tradesman who doesn't think it necessary to issue an invoice? At the Israel Tax Authority we are constantly fighting the black economy."

These remarks came this morning from Israel Tax Authority director Eran Yaacov at the conference of the Institute of Tax Consultants in Israel in Eilat. Asked by "Globes" how exactly the Tax Authority plans to fight the black economy when most of its plans were taken out of the current Economic Arrangements Bill accompanying the state budget, Yaacov responded that he would continue to advance the planned reform in the fight against fictitious invoices that had been dropped from the bill.

The plan, which was supposed to have brought in billions of shekels in tax revenue, is known as the "Chilean model". Under the program, revealed by "Globes", any business owner issuing an invoice of over NIS 5,000 is meant to receive an immediate approval online from the Tax Authority at the time the invoice is issued. It will not be possible to offset the VAT on an invoice that has not been approved. The Tax Authority's aim is to be present when money is transferred between businesses and to prevent fictitious invoices, but, as mentioned, the plan has been blocked.

Commenting on that, Yaacov said, "I genuinely believe that the more tools that are made available to the Tax Authority, the more we shall succeed. And part of the battle against the black economy is the ability to shift towards prevention. Technology is the way. For one reason or another, they did not allow us to proceed with the Israel Invoices plan. We shall continue to fight to introduce it, and there's no other way to deal with this cancerous phenomenon."

Following Yaacov's remarks, the president of the Institute of Tax Consultants in Israel, Yaron Gindi, revealed that MK Alex Kushnir, who is chairperson of the Knesset Finance Committee, had promised the Tax Authority director that he would raise the model for the fight against fictitious invoices in the winter session of the Knesset.

On the Tax Authority's plan to impose a tough reporting requirement on players in the cryptocurrency market (mandatory reporting of any holding of virtual currency worth NIS 200,000 or more, or that cost NIS 200,000 or more to buy), which was also taken out of the Economic Arrangements Bill, Yaacov said, "We tried to bring things into the daylight and make them transparent in the current bill. We are not sitting idly. Just as we reached the owners of bank accounts in Switzerland and obtained all the information on those who changed their accounts a moment beforehand, and as now with currency exchange bureaus we see everything and will be able to get to everyone, so too with virtual currencies, we're there even without the legislation. The more transparent it is made for us, the more we'll know."

Yaacov stressed that even without mandatory reporting on holdings of virtual currency, the Tax Authority will catch anyone who evades tax through the cryptocurrency market. "With or without legislation, I tell you and the public as well, we're there with the most advanced technology for dealing with blockchain. We have brought several breakthrough cases in contending with the digital currencies. Our ability to reach those who choose to get smart with the law is of an international standard. Don't put the Tax Authority to the test."

Published by Globes, Israel business news - en.globes.co.il - on October 18, 2021.

© Copyright of Globes Publisher Itonut (1983 Ltd., 2021.

Eran Yaacov  / Photo: Shlomi Yosef , Globes
Eran Yaacov / Photo: Shlomi Yosef , Globes
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